IBM i Vendors Seeking ‘Meaningful Exits’ Have Options

Skills depletion within the IBM i community has been well documented on these pages in issues past. Another side effect of working on an older computer platform is the aging of the software vendor community itself. As the baby boomer owners approach retirement age, a handful of industry consolidators are eager to give the software companies they created good homes.

One of the most active vendors in the IBM i community over the past few years is Fresche Solutions. The Montreal, Quebec-based company was known as Speedware back in 2012 when it bought a German RPG migration tool company called Sykora, and then changed its name to Fresche Legacy. A year later it snapped up database modernization tool vendor Databorough, and then in 2015 it bought looksoftware, the Australian modernization tool provider.

Last June brought the pièce de résistance – the acquisition of Quadrant Software, which itself had already consumed BCD Software, a big player in the IBM i modernization market. Now, with nearly 300 employees and an IBM i client base in excess of 22,000, Fresche is keen to expand the company even more by extending a lifeline to other IBM i software companies looking for an exit.

“You certainly shouldn’t be surprised to see Fresche in the news in the next nine to 12 months or thereabouts, as we continue and complete our integration efforts,” says Fresche President and Chief Executive Officer Andy Kulakowski. “We certainly have identified other areas in the community and other types of offerings that would complement the ones we have to broaden that value and positioning of a one-stop shop to IBM i clients.”

Kulakowski says he hears from the heads of other IBM i software companies on a regular basis. That attention, he adds, is likely due to Fresche’s openness “about providing a good home for a lot of these businesses who are looking for a nice graceful and meaningful exit.”

“The vendor community is filled with founders, entrepreneurs of companies that . . . are owned by baby boomers who are approaching retirement,” he says. “They do not have the means to take their respective companies to the next step, and are just looking for a good home for the great business they developed and that they ran for decades.”

A similar sentiment was expressed by HelpSystems, which has been the most active IBM i vendor on the mergers and acquisitions front. The company’s CEO Chris Heim and Jim Cassens, its executive vice president of M&A, say activity on that front is about to heat up.

“The AS/400 was introduced roughly 30 years ago and many of the leaders that created a business on this platform are now building succession plans,” Heim and Cassens stated in a written response to IT Jungle‘s questions. “Those plans will include finding a good home for their business.”

HelpSystems takes regular calls from leaders of IBM i software companies. “They know our strategy includes keeping acquired offices open and to continue selling, improving, and supporting acquired products,” Heim and Cassens write. “They know that working with us provides them with a nest egg and a good home for their company.”

Another driver of the acquisition market, Heim and Cassens say, revolves around IBM i shops looking to reduce the number of vendors they work with. “Businesses with a narrower product line are seeing increased challenges to selling their products,” they write. “We can help eliminate those barriers by integrating those solutions into our product line.”

HelpSystems has been the most high profile consolidator in the IBM i space over the past decade, with 14 acquisitions, including IBM i software vendors Bugbusters and Tango/04 (2016), Skyview and Halcyon (2015), RJS and Coglin Mill (2014), IBM’s ShowCase products (2013), CCSS and Safestone (2012), the Datathread product from Innovatum (2011), Bytware and PowerTech (2008), and ASC (2006).

When the economy was tanking in the 2008 to 2011 timeframe, one could argue that potential acquirers backed by private equity funds, such as HelpSystems, Fresche, and Vision Solutions, held the upper hand. Selling out to a bigger firm may have been the only alternative besides bankruptcy or shuttering the business.

But now that the economy is stronger, smaller IBM i vendors have an edge. “We think it is a seller’s market,” Heim and Cassens write. “The economy is strong, the stock market is high, and interest rates are low. While any of these reasons could change tomorrow, for today, it is a good time to sell a company.”

So who’s going to make the next headline in IT Jungle for joining the Fresche or HelpSystems juggernauts? Obviously, the CEOs of these companies are playing their cards close to the vest, and won’t name names. But they will talk about general categories of categories that they’re open to.

For HelpSystems, this list includes IT operations management, security, business intelligence, and document management. “We will continue to look for opportunities in those categories,” Cassens and Heim write. HelpSystems is also looking outside of the box, and entertaining offers that include software for Windows, Linux, and AIX.

Fresche is not looking off the box, and instead is looking to expand the breadth of offerings it has for IBM i customers. “Right now we’re looking at all areas,” Kulakowski tells IT Jungle. “We really are open horizontally to all kinds of different solutions and offerings that bring value to our customers.”

Fresche is also looking to the cloud for potential growth. Whether or not it buys an existing managed service provider (MSP), builds its own private cloud, or partners with an existing MSP, it’s clear that Fresche sees a future in hosting and managing workloads on behalf of its clients.

“Once again, it’s an extension of some of the things that our clients are looking for, as we already provide application management and organization services,” Kulakowski says. “As skills become more and more in demand and hard to find, we certainly would provide a great solution to a great percentage of the marketplace, to be able to take their application into a hosted environment, into a cloud environment that we could host and maintain for them.”

Kulakowski considers Fresche’s focus on IBM i and building jobs an advantage in recruiting new brands to the company. The CEO says the company’s main equity partners, Fonds de solidarité FTQ and Fondsaction, both which are labor-sponsored funds, share Fresche’s fondness for IBM i and jobs.

“We do believe that there is a great attraction within the vendor community to be part of something bigger and be part of something more important,” Kulakowski says. “For those reasons we still see an awful lot of interest in the community for consolidation, so we’re very invigorated by that because I believe it does meet what our vision is and what our goals are in this marketplace.”

Share this:

Our software products are the most feature-rich, cost-effective solutions available!

TLAForms converts traditional IBM i spool files into high quality, professional forms that are output as PDF documents. A form is associated with a spool file and the form is designed. TLAForms then ‘watches’ the IBM i output queue for a new spool file to be generated. When a new spool file is generated, TLAForms reads the data from the spool file, places the data on the form, and outputs a PDF document. The PDF documents can be archived to the IFS, automatically printed, and emailed.

Features:

Select Data directly from an IBM i Spool File

Burst IBM i Spool Files based on page or Spool File data

Add spool file data to form as Text using a wide variety of fonts and colors

Barcode400 is native IBM i software giving you the ability to design and print labels directly from your IBM i in minutes! Compliance and RFID labeling is just as easy using Barcode400’s tools and templates.

Features:

Software resides on the IBM i

IBM i security and Backup

Labels are centrally located on the IBM i

Label formats are available to all users the instant they are saved – even in remote facilities